December 2003

APWA Book Review

Managed Competition in Public Works40 pp * 2001 * APWA * Ron Jensen

The purpose of this publication is to introduce the concept of Managed Competition to those involved in the process of providing public services. The intent of the publication is to not only answer the question "What is Managed Competition?" but to also explain how it can be used to reduce the cost of providing excellent public services while maintaining or improving service quality.

Public agencies recognize that Managed Competition can be a useful resource for innovation and efficiency if it is used properly. With a reduction in financial resources and increased demands for public services, public agencies are being forced to evaluate more effective methods of service delivery.

This competitive approach has many benefits in that employees are allowed to challenge the system in order to effectively compete with private sector firms. They can work with management to champion changes that in past circumstances would not have been considered. The new work environment stimulates creativity through employee empowerment and supports a mindset of continuous improvement. With a focus on both efficiency and effectiveness, both labor and management can come out winners in this competitive process.

Under Managed Competition, a public agency competes with private sector firms to provide public functions and services. Managed Competition attempts to create a "level playing field" between the public and private sectors so that a valid comparison can be made between service providers. Since public agencies and private firms do not operate under the same guidelines and constraints, this is not always possible. The effort to compare costs and service levels can be done effectively, however, if the public agency operates as a business by identifying all of the direct costs and appropriate indirect costs associated with the function. Determining appropriate costs is always an issue of debate and one that needs to be resolved early in the process.

The focus of this publication is on the cost comparison process that takes place when a public agency identifies a public service that is to be put out for bid in direct competition with qualified private firms. The various chapters cover the theory of the process to be followed, the means by which public employees prepare for the rigors of competition, and the experience gained by other public agencies that have utilized Managed Competition.

The subject of Managed Competition in this publication is identified as a basic process to be utilized in comparing public and private costs as an alternative to direct outsourcing and privatization. In general, an overview of the Managed Competition process is provided. Starting with the history and management theory, additional chapters cover critical issues as well as the steps to follow in implementing a new program. Since the key to developing a successful program is learning from others, case studies covering a wide variety of applicants are included in the appendix.

For more information on purchasing this book and other American Public Works Association books, please visit the APWA Bookstore online at /bookstore or call the Member Services Hotline at (800) 848-APWA, ext. 3560.